Mortgage hike and clothes price rises push up cost of living in September

HIGHER MORTGAGE repayments and more expensive clothes and shoes led to a greater-than-expected rise in the cost of living last month, according to the Central Statistics Office (CSO).

The latest inflation data show that prices were 2.6 per cent higher in September than a year earlier. Between August and September, prices climbed by 0.3 per cent, the largest monthly increase recorded since April.

A year ago, the comparable increase was 0.1 per cent.

The end-of-summer sales was the main driver behind increases in clothing and footwear, where prices were 5.4 per cent higher on a monthly basis.

A stronger euro against sterling may also have contributed to the rising trend, both in this area and in the price of food.

Mortgage interest charges were also a source of pain for consumers last month, climbing by 3.1 per cent between July and August and by 17.2 per cent over the year.

Rate increases from the European Central Bank in April and July were the main culprits here, although homeowners may take some comfort from the likelihood that rates are more likely to be reduced than raised in the near term.

Alan McQuaid, chief economist with Bloxham, noted, however, that the ECB was unlikely to move before December, thus reserving any positive impact for next year.

Further headaches came from stronger energy prices last month, again driven by international rather than domestic factors.

Petrol was 15.4 per cent more expensive than in September, 2010 and 0.3 per cent dearer than in August. The price of electricity climbed by 1.6 per cent over the month and by 9.6 per cent over the year.

Mr McQuaid pointed out that more was on the way on this front, with increases in gas and electricity bills due to feed through over coming months.

The CSO said food prices as a whole were 1.4 per cent higher than a year earlier, with many individual foodstuffs posting considerably higher rises. Flour, for example, was 13.2 per cent more expensive, while butter rose by 10.3 per cent. Potatoes on the other hand, fell by 12.9 per cent, according to the CSO’s numbers.

Some positive news for consumers came in the monthly figures for transport costs, which were 0.7 per cent lower, mostly because of lower air fares. The annual figures were less encouraging, with air fares up 19.9 per cent year-on-year.

The Harmonised Index of Consumer Prices, also released yesterday, was on the rise too, up 1.3 per cent on the same month of 2010 and 0.1 per cent since August. The index, which strips out mortgage interest charges and allows comparison with other EU states, showed the Republic had the second-lowest inflation rate among member states last month.

“From a competitiveness perspective, recent increases in the Irish price level continue to compare favourably to developments elsewhere,” noted economists at Ulster Bank.

Both Isme and the Small Firms Association yesterday urged the Government to work on controlling input costs for business, in light of the inflation numbers.